Why You Should Start Your Estate Planning Process Now

Years ago, a friend told me about a guy on the conference circuit. This guy did one thing, had one service, and one pitch. Let’s call him Bob.

Bob told a story about his parents who had been fairly successful but then died young.

The wealth his parents had built up could have helped him take care of his brothers and sisters. However, they hadn’t done any estate planning and most of their assets were eaten up by probate and lawyer fees.

So Bob made it his mission in life to make sure that didn’t happen to anyone else.

He charged a flat fee and consulted with only one client a day so he could focus.

I never used Bob’s services. I was too young at the time for the complex planning he implied he did for people. But his story made an impact on me. Probate can be disastrously expensive.

Why You Should Start Your Estate Planning Today

Even if you don’t have much when you die, the process of getting whatever assets you do have into the hands of those you want to inherit them can be a big hassle for those heirs if you leave no instructions. Asset thresholds of as low as US$25,000 can trigger probate in some states. Real estate assets of any value will likely trigger probate in most states.

A will can help with smaller estates, facilitating an affidavit procedure or summary administration, but, to completely avoid probate, you need to do some planning.

This was Bob’s point.

I’m right now going through that planning process with my mother. She doesn’t have much, but does have enough to trigger probate in the state where she’s living.

Therefore, I’m taking basic steps to put assets in joint accounts or to have beneficiaries named along with transfer on death orders for her real estate and car.

For a larger estate, a trust in some form is the main vehicle to avoid probate.

Bob’s niche was setting up living trusts. A living trust is revocable until you die, meaning it provides no asset protection but does work for estate planning. Once you die, the trust becomes irrevocable. The assets are owned in the trust for the named beneficiaries. Your estate doesn’t own anything… as long as you transferred the assets into the trust before you died.

Some people set up a living trust but don’t take the next step of titling their assets—their house, real estate investments, or brokerage accounts—into the name of the trust. In this case, when the owner of the trust dies, assuming testamentary trust instructions in the living trust, all his assets are pulled into the trust. However, those assets are part of the estate… and therefore the probate process.

An irrevocable trust, whether domestic or foreign, requires you to transfer whatever assets you want protected into the trust, meaning most people are likely to have their assets in the name of the trust. That does provide some asset protection, especially in the case of a foreign trust.

But this isn’t a lesson in trusts…

It’s a wake-up call to do some planning for your estate… now, while you can.

Estate Planning Doesn’t Have To Be Difficult

It could be as simple as giving your assets away while you’re alive.

I think one big reason many people avoid taking concrete steps to do with estate planning is uncertainty. Put assets into an irrevocable trust, and you are no longer in complete control. The beneficiaries are listed for after you die. What if you decide one beneficiary is no longer worthy, for example?

You can put in contingencies… but what if you want to completely disinherit one of your grandchildren? It sounds cold, but people do it all the time.

If you’re uncomfortable with the irrevocable part of an irrevocable trust, take a look at a living trust or some combination. If you have enough assets to warrant multiple structures, you could break things up into one or more of each type of trust.

My point is: Do something. Today.

At a minimum have a will created in each country where you own property so that the people you want to inherit your assets will get them… even if they do have to go through a probate process.

Waiting can create havoc for your heirs if you die suddenly, like it did for Bob and his siblings.

Lief Simon
Editor, Offshore Living Letter